Before this most recent quarter's report, The Motley Fool
(TMF) had this to say regarding AMZN's likely fourth
quarter results:
In the past three years, quarter four revenue averaged
over three times that of quarter one revenue. If this holds
true, quarter four revenue alone could top $850 million this
year.
fool.com
Now that we have 2Q results, it is probably time to update
this calculation. First of all the data:
HISTORICAL QUARTERLY RESULTS
REVENUE
(Thousands of U.S. Dollars)
1996 1997 1998 1999
1st Qtr MAR 875 16,005 87,361 293,643
2nd Qtr JUN 2,230 27,855 116,044 314,377*
3rd Qtr SEP 4,173 37,887 153,698
4th Qtr DEC 8,468 66,040 252,893
tscn.com
Sums over all quarters, 1996 to 1998, are as follows:
1st Qtr MAR 104241
2nd Qtr JUN 146129
3rd Qtr SEP 195758
4th Qtr DEC 327401
The ratio 4Q/1Q = 3.14, slightly over 3, as suggested by the
fools. Given 1Q99's revenue of $293MM, applying this multiple
would give results for 4Q99 of $1028MM. This is in excess of
the $850MM that TMF estimated, because they rounded 3.14 to 3
in their calculation.
The ratio 3Q/1Q = 2.24, naturally smaller. Given 2Q99's revenue
of $314MM, applying this multiple would give estimated results
for 4Q99 of $704MM. Rounding 2.24 to 2, as TMF did in their
calculation, gives a revenue estimate of $630MM.
I should note that the above techniques for estimating Q4
revenues are both silly. They ignore the fact that the secular
trend in AMZN's growth is incredibly negative. The only reason
I include it here is to illustrate the following:
(1) AMZN's 2Q results were disastrous.
(2) The people promoting this stock have no idea how to estimate results.
(3) AMZN's growth rate is dropping very quickly.
It is clear now that TMF was way over-optimistic in their
esimate. Note that they have not posted any sort of retraction,
and are still talking this stock up. The effect of the reduction
in sales from the above calculations is something like 25%,
depending on how you make the calculation.
The consequences of a reduction in revenue estimate of this
magnitude to the predicted stock value is huge:
(1) The reduction in top line means that AMZN would have 25% fewer sales.
(2) The reduction in sales means that the earnings (or cash flow) would be worse.
(3) The reduction in growth means that the P/S ratio would have to be reduced.
As far as estimating what AMZN's 4Q99 sales would be, I have
posted my estimate as $500MM in the previous post to this. My
calculations take into account the secular decrease in AMZN
growth rates. This growth rate is dropping regardless of the
vertical businesses grown into, and was particularly bad this
past quarter despite the addition of an auction business at
the start of the quarter.
-- Carl |
